Weatherford to axe 6,000 jobs as it gears up for prolonged low oil price

Weatherford International, an oil and gas services company, is planning to reduce its headcount by another 6,000 after 14,000 had already been laid off in 2015 due to low activity levels. 

In the 4Q 2015 results report on Wednesday, Weatherford said that due to severe market contraction, the company is managing what it can control.

In 2015, Weatherford completed the 14,000 headcount reduction target, closed six of its planned seven manufacturing and service facilities and approximately 90 operating facilities in North America, completing 20 in the fourth quarter.

According to the company, these and other actions have generated annualized cost savings of $1.4 billion.

As the company continues to face harsh market conditions, Weatherford plans to further cut costs by cutting another 6,000 jobs during the first half of 2016.

Furthermore, Weatherford will also close another 9 manufacturing and services facilities, and continue to rationalize the company’s operating facility footprint.

“In line with these cost reduction measures, the full year forecast for capital expenditures will be $300 million, 56% lower than our 2015 spending,” the company said.

Revenues down 46 pct

Weatherford’s GAAP net loss for the fourth quarter of 2015 was $1.21 billion and its revenues sank 46 percent year over year. Namely, Weatherford posted $2.01 billion in revenues in 4Q 2015, as opposed to  $3.7 billion in 4Q 2014. The company’s net loss in 4Q 2014 was $475 million.

After-tax charges of $1.11 billion for the fourth quarter primarily include: $952 million primarily fixed asset impairments, inventory write-downs, and other charges; $85 million of legacy contract charges; $55 million of costs related to severance and facility closures from our 2015 cost reduction plan; and $17 million due to foreign currency devaluation and related charges primarily in Argentina.

Bernard J. Duroc-Danner, Chairman of the Board, President and Chief Executive Officer, stated, “We have just completed what is probably the most challenging year in our history.”

“The brutality and length of this downcycle has challenged the entire industry, both our customer base as well as our peers. Weatherford has responded to this challenge, something that we would probably not have been capable of doing in years past. We adjusted quickly to the new industrial context, took advantage of the downturn, and aggressively transformed our cost base, addressing both the cyclical and structural.”

Near-term outlook challenging

When it comes to the company’s outlook, Duroc-Danner said: “As we look forward, we believe that oil prices will respond to the gradual tightening of the supply-demand balance, with increasing demand and diminishing supply. This is inevitable, given the extreme cuts in both capital and operating spend by our customer base around the world. 

“Regardless, we have geared the company and will increasingly do so for a prolonged period of very low activity.”

He added: “The near-term outlook is challenging with lower levels of customer activity, continued pricing pressures and seasonal declines across many parts of the Northern Hemisphere. Volatility adds uncertainty to decision making already strained by the distressed level of oil prices. We believe the second half of the year will show a slight recovery underpinned by the stabilizing of commodity prices.”